<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 1-9029
TRUMP'S CASTLE HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 11-2735914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huron Avenue and Brigantine Boulevard
Atlantic City, New Jersey 08401
(609) 441-8406
(Address, including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
TRUMP'S CASTLE FUNDING, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 11-2739203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huron Avenue and Brigantine Boulevard
Atlantic City, New Jersey 08401
(609) 441-8406
(Address, including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
TRUMP'S CASTLE ASSOCIATES, L.P.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2608426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huron Avenue and Brigantine Boulevard
Atlantic City, New Jersey 08401
(609) 441-8406
(Address, including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of November 14, 2000 , there were 100 shares of Trump's Castle Hotel &
Casino, Inc.'s Common Stock, no par value, outstanding. Trump's Castle Hotel &
Casino, Inc. meets the conditions set forth in General Instructions H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
As of November 14, 2000 , there were 200 shares of Trump's Castle Funding,
Inc.'s Common Stock, par value $.01 per share, outstanding. Trump's Castle
Funding, Inc. meets the conditions set forth in General Instructions H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
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<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets as of December 31, 1999 and
September 30, 2000 (unaudited)......................................................... 1
Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 1999 and 2000 (unaudited).......................................... 2
Condensed Consolidated Statement of Partners' Capital for the nine months ended
September 30, 2000 (unaudited)......................................................... 3
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 2000 (unaudited)................................................ 4
Notes to Condensed Consolidated Financial Statements (unaudited).......................... 5
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................................. 8
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk...................... 13
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings............................................................... 14
ITEM 2 - Changes in Securities and Use of Proceeds....................................... 14
ITEM 3 - Defaults Upon Senior Securities................................................. 14
ITEM 4 - Submission of Matters to a Vote of
Security Holders........................................................................ 15
ITEM 5 - Other Information............................................................... 15
ITEM 6 - Exhibits and Reports on Form 8-K................................................ 15
SIGNATURES
Trump's Castle Hotel & Casino, Inc..................................................... 16
Trump's Castle Funding, Inc............................................................ 17
Trump's Castle Associates, L.P......................................................... 18
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------ -------------
(unaudited)
ASSETS
------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.................. $ 21,413 $ 33,663
Receivables, net........................... 10,627 15,910
Inventories................................ 3,292 3,183
Prepaid expenses and other current assets.. 1,825 2,942
-------- --------
Total current assets...................... 37,157 55,698
PROPERTY AND EQUIPMENT, NET................. 481,731 475,388
OTHER ASSETS................................ 14,480 14,342
-------- --------
Total assets.............................. $533,368 $545,428
======== ========
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES
<S> <C> <C>
Current maturities-long term debt.............. $ 1,296 $ 1,069
Accounts payable and accrued expenses.......... 26,357 30,040
Due to affiliates.............................. 20,116 17,671
Accrued interest payable....................... 4,701 13,531
-------- --------
Total current liabilities................ 52,470 62,311
LONG TERM DEBT, LESS CURRENT MATURITIES........... 389,045 400,584
OTHER LONG TERM LIABILITIES....................... 3,548 7,471
-------- --------
Total liabilities........................ 445,063 470,366
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL................................. 88,305 75,062
-------- --------
Total liabilities and partners' capital.. $533,368 $545,428
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
1
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Gaming......................... $ 75,346 $ 82,065 $205,450 $208,529
Rooms.......................... 5,047 5,656 12,266 13,249
Food and beverage.............. 10,229 10,337 26,395 26,168
Other.......................... 3,435 3,519 8,055 7,907
-------- -------- -------- --------
Gross revenues................ 94,057 101,577 252,166 255,853
Less-promotional allowances.... 10,570 11,480 28,475 27,873
-------- -------- -------- --------
Net revenues.................. 83,487 90,097 223,691 227,980
-------- -------- -------- --------
COSTS AND EXPENSES
Gaming......................... 43,549 48,090 124,866 124,411
Rooms.......................... 1,042 870 2,889 3,116
Food and beverage.............. 3,541 3,258 8,144 8,467
General and administrative..... 16,130 17,484 46,622 50,656
Depreciation and amortization.. 4,454 4,372 12,980 13,034
-------- -------- -------- --------
68,716 74,074 195,501 199,684
-------- -------- -------- --------
Income from operations........ 14,771 16,023 28,190 28,296
INTEREST INCOME................. 193 277 585 791
INTEREST EXPENSE................ (13,604) (14,267) (40,335) (42,330)
-------- -------- -------- --------
Net income (loss)............. $ 1,360 $ 2,033 $(11,560) $(13,243)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
2
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Contributed Accumulated
Capital Deficit Total
--------- ----------- ------------
<S> <C> <C> <C>
Balance at December 31, 1999... $175,395 $ (87,090) $ 88,305
Net loss....................... - (13,243) (13,243)
-------- --------- --------
Balance at September 30, 2000.. $175,395 $(100,333) $ 75,062
======== ========= ========
</TABLE>
The accompanying notes are an integral part of this condensed consolidated
statement.
3
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1999 2000
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss....................................................... $(11,560) $(13,243)
Adjustments to reconcile net loss to net cash flows provided
by operating activities-
Depreciation and amortization........................... 12,980 13,034
Issuance of PIK Notes in exchange for accrued interest.. 6,418 7,339
Accretion of bond discount.............................. 3,220 3,766
Provision for losses on receivables..................... 201 1,037
Valuation allowance-CRDA investments.................... 1,099 1,385
Increase in receivables................................. (4,770) (6,320)
(Increase) decrease in inventories...................... (149) 109
Increase in prepaid expenses and other current assets... (750) (1,117)
(Increase) decrease in other assets..................... (178) 650
Increase in current liabilities......................... 7,212 12,513
Decrease in amounts due to affiliates................... (763) (2,658)
Increase in other liabilities........................... 3,378 3,923
-------- --------
Net cash flows provided by operating activities.... 16,338 20,418
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net................ (2,365) (4,538)
Purchase of CRDA investments............................ (2,583) (2,522)
-------- --------
Net cash flows used in investing activities........ (4,948) (7,060)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of other borrowings........................... (1,499) (1,108)
-------- --------
Net cash flows used in financing activities........ (1,499) (1,108)
-------- --------
Net increase in cash and cash equivalents.......... 9,891 12,250
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................. 19,723 21,413
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................ $ 29,614 $ 33,663
======== ========
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 18,201 $ 18,296
======== ========
Purchase of equipment under capitalized lease obligations $ 4,059 $ 1,314
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
(1) Organization and Operations
The accompanying condensed consolidated financial statements include those
of Trump's Castle Associates, L.P., a New Jersey limited partnership (the
"Partnership"), and its wholly owned subsidiary, Trump's Castle Funding, Inc., a
New Jersey corporation ("Funding"). The Partnership is 99% owned by Trump
Hotels & Casino Resorts Holdings, L.P., a Delaware limited partnership ("THCR
Holdings"), and 1% by Trump's Castle Hotel & Casino, Inc., a New Jersey
corporation ("TCHI"). TCHI is wholly owned by THCR Holdings, and THCR Holdings
is currently a 63.4% owned subsidiary of Trump Hotels & Casino Resorts, Inc., a
Delaware corporation ("THCR").
All significant intercompany balances and transactions have been eliminated
in these condensed consolidated financial statements.
The Partnership operates the Trump Marina Hotel Casino ("Trump Marina"), a
luxury casino hotel located in the Marina District of Atlantic City, New Jersey.
The majority of Trump Marina's revenues are derived from its gaming operations.
Since Funding has no business operations, its ability to repay the
principal and interest on the $62,000 10 1/4% Senior Secured Notes due 2003 (the
"Senior Notes"), the 11 3/4% Mortgage Notes due 2003 (the "Mortgage Notes") and
its Increasing Rate Subordinated Pay-in-Kind Notes due 2005 (the "PIK Notes") is
completely dependent upon the operations of the Partnership.
Since TCHI has no business operations, its ability to repay the principal
and interest on the $5,000 10 1/4% Senior Secured Notes due 2003 (the "Working
Capital Loan") is completely dependent upon the operations of the Partnership.
The accompanying condensed consolidated financial statements have been
prepared by the Partnership without audit. In the opinion of the Partnership,
all adjustments, consisting of only normal recurring adjustments necessary to
present fairly the financial position, results of operations and cash flows for
the periods presented have been made.
The accompanying condensed consolidated financial statements have been
prepared by the Partnership pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Accordingly, certain
information and note disclosures normally included in the financial statements
prepared in conformity with generally accepted accounting principles have been
omitted.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the annual report on Form 10-K for the year ended December 31, 1999
filed with the SEC by the Partnership, Funding and TCHI.
The casino industry in Atlantic City is seasonal in nature. Accordingly,
the results of operations for the three and nine month periods ending September
30, 2000 are not necessarily indicative of the operating results for a full
year.
5
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(dollars in thousands)
(unaudited)
(2) Financial Information of Funding
Financial information relating to Funding is as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------ -------------
<S> <C> <C>
Total Assets (including Mortgage Notes Receivable of $242,141, net of
unamortized discount of $22,906 at December 31, 1999 and $19,577 at September
30, 2000, PIK Notes Receivable of $105,791, net of unamortized discount of
$6,325 at December 31, 1999 and $113,130, net of unamortized discount of $5,888
at September 30, 2000, Senior Notes Receivable of $62,000 at December
31, 1999 and September 30, 2000) $ 380,701 $ 391,806
========= ==========
Total Liabilities and Capital (including Mortgage Notes Payable of $242,141, net
of unamortized discount of $22,906 at December 31, 1999 and $19,577 at September
30, 2000, PIK Notes Payable of $105,791, net of unamortized discount of $6,325
at December 31, 1999 and $113,130, net of unamortized discount of $5,888 at
September 30, 2000, Senior Notes Payable of $62,000
at December 31, 1999 and September 30, 2000) $ 380,701 $ 391,806
========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
------- ------- ------- --------
<S> <C> <C> <C> <C>
Interest Income... $13,267 $13,880 $39,361 $41,115
Interest Expense.. 13,267 13,880 39,361 41,115
------- ------- ------- --------
Net Income........ $ - $ - $ - $ -
======= ======= ======= ========
</TABLE>
6
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(dollars in thousands)
(unaudited)
(3) Financial Information of TCHI
Financial information relating to TCHI is as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------ ------
<S> <C> <C>
Total Assets (including Working Capital Loan Receivable of
$5,000 at December 31, 1999 and September 30, 2000)............. $5,000 $5,000
====== ======
Total Liabilities and Capital (including Working Capital Loan
Payable of $5,000 at December 31, 1999 and September 30, 2000).. $5,000 $5,000
====== ======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
----- ----- ----- -------
<S> <C> <C> <C> <C>
Interest Income... $ 128 $ 128 $ 384 $ 384
Interest Expense.. 128 128 384 384
----- ----- ----- -------
Net Income........ $ - $ - $ - $ -
===== ===== ===== =======
</TABLE>
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (dollars in thousands)
Capital Resources and Liquidity
Cash flow from operating activities is the Partnership's principal source
of liquidity. For the nine months ended September 30, 2000, the Partnership's
net cash flow provided by operating activities was $20,418.
In addition to funding operations, the Partnership's principal uses of cash
are capital expenditures and debt service.
Capital expenditures for 2000 are anticipated to be approximately $8,000
and consist principally of a slot room expansion project, hotel room
renovations, as well as ongoing property enhancements. The slot room expansion
project, which was completed during the second quarter of 2000, increased Trump
Marina's gaming space by approximately 6,200 square feet (8.2%) and added 244
slot machines.
The Partnership's debt consists primarily of (i) the Mortgage Notes, (ii)
the PIK Notes, (iii) the Senior Notes and (iv) the Working Capital Loan.
The Mortgage Notes have an outstanding principal amount of approximately
$242,141, bear interest at the rate of 11 3/4% per annum and mature November 15,
2003.
The PIK Notes have an outstanding principal amount of approximately
$113,130 and mature November 15, 2005. Interest is currently payable semi-
annually at the rate of 13 7/8%. On or prior to November 15, 2003, interest on
the PIK Notes may be paid in cash or through the issuance of additional PIK
Notes. During the second quarter of 2000, interest in the amount of
approximately $7,339 was satisfied through the issuance of additional PIK Notes.
The Partnership anticipates that additional interest due during the fourth
quarter of 2000 in the amount of approximately $7,849 will also be satisfied
through the issuance of additional PIK Notes. Approximately 90% of the PIK Notes
are currently owned by THCR Holdings.
The Senior Notes have an outstanding principal amount of $62,000 and bear
interest at the rate of 10 1/4% per annum, payable semi-annually each April and
October. The entire principal balance of the Senior Notes matures April 30,
2003.
The Working Capital Loan has an outstanding principal amount of $5,000 and
bears interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The entire principal balance of the Working Capital Loan
matures April 30, 2003. The Partnership has the authority to obtain a working
capital facility of up to $10,000 (of which approximately $5,000 is
outstanding), although there can be no assurance that such financing will be
available, or on terms acceptable to the Partnership.
The ability of Funding, TCHI and the Partnership to pay their indebtedness
when due will depend on the Partnership either generating cash from operations
sufficient for such purposes or refinancing such indebtedness on or before the
date on which it becomes due. Cash flow from operations may not be sufficient
to repay a substantial portion of the principal amount of the debt at maturity.
The future operating performance of the Partnership and the ability to refinance
this debt will be subject to the then prevailing economic conditions, industry
conditions and numerous other financial, business and other factors, many of
which are beyond the control of Funding, TCHI or the Partnership. There can be
no assurance that the future operating performance of the Partnership will be
sufficient to meet these repayment obligations or that the general state of the
economy, the status of the capital markets or the receptiveness of the capital
markets to the gaming industry will be conducive to refinancing this debt or
other attempts to raise capital.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (dollars in thousands) - (continued)
Results of Operations: Operating Revenues and Expenses
The financial information presented below reflects the financial condition
and results of operations of the Partnership. Funding is a wholly owned
subsidiary of the Partnership and conducts no business other than collecting
amounts due under certain intercompany notes from the Partnership for the
purpose of paying principal of, premium, if any, and interest on its
indebtedness, which Funding issued as a nominee for the Partnership.
Comparison of Results of Operations for the Three Month Periods Ended September
30, 1999 and 2000.
Gaming revenues are the primary source of the Partnership's revenues and
primarily consist of table game and slot machine win. The following chart
details activity for the major components of gaming revenue:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 2000
-------- --------
<S> <C> <C>
Table Game Revenue................ $ 20,401 $ 25,161
Increase from Prior Period........ $ 4,760
Table Game Drop................... $134,798 $140,181
Increase from Prior Period........ $ 5,383
Table Game Win Percentage......... 15.1% 17.9%
Increase from Prior Period........ 2.8 pts.
Number of Table Games............. 85 76
Decrease from Prior Period........ (9)
Slot Revenue...................... $ 54,296 $ 56,258
Increase from Prior Period........ $ 1,962
Slot Handle....................... $700,336 $724,062
Increase from Prior Period........ $ 23,726
Slot Win Percentage............... 7.8% 7.8%
Number of Slot Machines........... 2,123 2,515
Increase from Prior Period........ 392
Other Gaming Revenue.............. $ 649 $ 646
Decrease from Prior Period........ ($3)
Total Gaming Revenues............. $ 75,346 $ 82,065
Increase from Prior Period........ $ 6,719
</TABLE>
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (dollars in thousands) - (continued)
Table game revenues increased approximately $4,760 or 23.3% to $25,161 for
the three months ended September 30, 2000 from $20,401 for the three months
ended September 30, 1999. This increase is the result of a higher table game
win percentage in addition to a higher table game drop as compared to last year.
Table game revenues represent the amount retained by the Partnership from
amounts wagered at table games. The table game win percentage tends to be
fairly constant over the long term, but may vary significantly in the short
term, due to large wagers by "high rollers." The Atlantic City industry table
game win percentages were 15.1% and 14.9% for the three months ended September
30, 2000 and 1999, respectively.
Slot revenues increased $1,962 or 3.6% to $56,258 for the three months
ended September 30, 2000 from $54,296 for the three months ended September 30,
1999. The Partnership completed its slot room expansion project during the
second quarter of 2000, increasing gaming space approximately 6,200 square feet
(8.2%) and adding 244 slot machines. This project enhances Trump Marina's
ability to attract and retain slot customers in the competitive Atlantic City
marketplace. Competition in the Atlantic City gaming market is intense and
while no significant expansion is expected in 2000, the Partnership believes
that competition will continue to intensify due to expansion by existing
operators and as new entrants to the gaming industry become operational.
Gross revenues include the retail value of the complimentary food, beverage
and hotel services provided to patrons. The retail value of these promotional
allowances is deducted from gross revenues to arrive at net revenues. The costs
of providing such complimentaries have been classified as gaming costs and
expenses through interdepartmental allocations in the accompanying consolidated
statements of operations. The costs associated with providing cash non-gaming
services are classified in food, beverage and rooms costs and expenses in the
accompanying consolidated statements of operations.
Non-gaming revenues, in the aggregate, increased approximately $801 or 4.3%
to $19,512 for the three months ended September 30, 2000 from $18,711 for the
three months ended September 30, 1999. This variance is due primarily to an
increase in room revenue activity resulting from an improved occupancy
percentage coupled with an increase in the average room rate. This also
resulted in a corresponding increase in promotional allowances of $910 or 8.6%
to $11,480 for the three months ended September 30, 2000 from $10,570 for the
three months ended September 30, 1999.
Gaming costs and expenses increased approximately $4,541 or 10.4% to
$48,090 for the three months ended September 30, 2000 from $43,549 for the three
months ended September 30, 1999. This was due primarily to the increased
spending in promotional and complimentary marketing programs, which was incurred
to stimulate gaming revenues.
Food and beverage costs decreased approximately $283 or 8.0% to $3,258 for
the three months ended September 30, 2000 from $3,541 for the three months ended
September 30, 1999. This decrease is due primarily to reduction in costs
related to a 6.2% decrease in food and beverage cash revenues generated in 2000
as compared to 1999.
General and administrative costs and expenses increased approximately
$1,354 or 8.4% to $17,484 for the three months ended September 30, 2000 from
$16,130 for the three months ended September 30, 1999. This increase is
primarily the result of incremental costs incurred related to a Services
Agreement the Partnership has with Trump Casinos II, Inc..
Interest expense increased approximately $663 or 4.9% to $14,267 for the
three months ended September 30, 2000 from $13,604 for the three months ended
September 30, 1999, primarily due to an increase in the outstanding principal of
the PIK Notes.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (dollars in thousands) - (continued)
Comparison of Results of Operations for the Nine Month Periods Ended September
30, 1999 and 2000.
Gaming revenues are the primary source of the Partnership's revenues and
primarily consist of table game and slot machine win. The following chart
details activity for the major components of gaming revenue:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
---------- ----------
<S> <C> <C>
Table Game Revenue.............. $ 55,400 $ 56,956
Increase from Prior Period...... $ 1,556
Table Game Drop................. $ 362,134 $ 339,844
Decrease from Prior Period...... ($22,290)
Table Game Win Percentage....... 15.3% 16.8%
Increase from Prior Period...... 1.5 pts.
Number of Table Games........... 87 76
Decrease from Prior Period...... (11)
Slot Revenue.................... $ 148,387 $ 150,323
Increase from Prior Period...... $ 1,936
Slot Handle..................... $1,878,950 $1,918,856
Increase from Prior Period...... $ 39,906
Slot Win Percentage............. 7.9% 7.8%
Decrease from Prior Period...... (.1) pts.
Number of Slot Machines......... 2,145 2,373
Increase from Prior Period...... 228
Other Gaming Revenue............ $ 1,663 $ 1,250
Decrease from Prior Period...... ($413)
Total Gaming Revenues........... $ 205,450 $ 208,529
Increase from Prior Period...... $ 3,079
</TABLE>
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (dollars in thousands) - (continued)
Table game revenues increased approximately $1,556 or 2.8% to $56,956 for
the nine months ended September 30, 2000 from $55,400 for the nine months ended
September 30, 1999. This increase is due primarily to a higher table game win
percentage than the previous year offset by a reduced table game drop. Table
game revenues represent the amount retained by the Partnership from amounts
wagered at table games. The table game win percentage tends to be fairly
constant over the long term, but may vary significantly in the short term, due
to large wagers by "high rollers." The Atlantic City industry table game win
percentages were 15.6% and 15.4% for the nine months ended September 30, 2000
and 1999, respectively.
Slot revenues increased approximately $1,936 or 1.3% to $150,323 for the
nine months ended September 30, 2000 from $148,387 for the nine months ended
September 30, 1999. The Partnership has continued its strategic marketing focus
of concentrating on the more profitable slot patron. The Partnership completed
its slot room expansion project during the second quarter of 2000, increasing
gaming space approximately 6,200 square feet (8.2%) and adding 244 slot
machines. This project enhances Trump Marina's ability to attract and retain
slot customers in the competitive Atlantic City marketplace. Competition in the
Atlantic City gaming market is intense and while no significant expansion is
expected in 2000, the Partnership believes that competition will continue to
intensify due to expansion by existing operators and as new entrants to the
gaming industry become operational.
Gross revenues include the retail value of the complimentary food, beverage
and hotel services provided to patrons. The retail value of these promotional
allowances is deducted from gross revenues to arrive at net revenues. The costs
of providing such complimentaries have been classified as gaming costs and
expenses through interdepartmental allocations in the accompanying consolidated
statements of operations. The costs associated with providing cash non-gaming
services are classified in food, beverage and rooms costs and expenses in the
accompanying consolidated statements of operations.
Non-gaming revenues, in the aggregate, increased approximately $608 or 1.3%
to $47,324 for the nine months ended September 30, 2000 from $46,716 for the
nine months ended September 30, 1999. This increase is due to improved cash
sales from non-gaming operations of approximately $1,210 or 6.6% to $19,451 for
the nine months ended September 30, 2000 from $18,241 for the nine months ended
September 30, 1999. Also, promotional allowances decreased approximately $602
or 2.1% to $27,873 for the nine months ended September 30, 2000 from $28,475 for
the nine months ended September 30, 1999. These results reflect the continued
strategy designed to control marketing costs and to increase cash sales from
non-gaming operations.
Room costs increased approximately $227 or 7.9% to $3,116 for the nine
months ended September 30, 2000 from $2,889 for the nine months ended September
30, 1999. This increase is due primarily to costs incurred related to a 18.3%
increase in cash rooms revenues generated in 2000.
Food and beverage costs increased approximately $323 or 4.0% to $8,467 for
the nine months ended September 30, 2000 from $8,144 for the nine months ended
September 30, 1999. This increase is due primarily to costs incurred related to
a 4.0% increase in food and beverage cash revenues generated in 2000.
General and administrative costs and expenses increased approximately
$4,034 or 8.7% to $50,656 for the nine months ended September 30, 2000 from
$46,622 for the nine months ended September 30, 1999. This increase is
primarily the result of incremental costs incurred related to a Services
Agreement the Partnership has with Trump Casinos II, Inc., employee benefits
and insurance costs.
Interest expense increased approximately $1,995 or 5.0% to $42,330 for the
nine months ended September 30, 2000 from $40,335 for the nine months ended
September 30, 1999, primarily due to an increase in the outstanding principal of
the PIK Notes.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (dollars in thousands) - (continued)
Seasonality
The casino industry in Atlantic City is seasonal in nature; accordingly,
the results of operations for the three and nine month periods ending September
30, 2000 are not necessarily indicative of the operating results for a full
year.
Important Factors Relating to Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. All statements, trend
analysis and other information contained in this Quarterly Report on Form 10-Q
relative to the Partnership's performance, trends in the Partnership's
operations or financial results, plans, expectations, estimates and beliefs, as
well as other statements including words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend" and other similar expressions, constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995. In connection with certain forward-looking statements contained in this
Quarterly Report on Form 10-Q and those that may be made in the future by or on
behalf of the Registrants, the Registrants note that there are various factors
that could cause actual results to differ materially from those set forth in any
such forward-looking statements. The forward-looking statements contained in
the Quarterly Report were prepared by management and are qualified by, and
subject to, significant business, economic, competitive, regulatory and other
uncertainties and contingencies, all of which are difficult or impossible to
predict and many of which are beyond the control of the Registrants.
Accordingly, there can be no assurance that the forward-looking statements
contained in this Quarterly Report will be realized or that actual results will
not be significantly higher or lower. Readers of this Quarterly Report should
consider these facts in evaluating the information contained herein. In
addition, the business and operations of the Registrants are subject to
substantial risks which increase the uncertainty inherent in the forward-looking
statements contained in this Quarterly Report. The inclusion of the forward-
looking statements contained in this Quarterly Report should not be regarded as
a representation by the Registrants or any other person that the forward-looking
statements contained in this Quarterly Report will be achieved. In light of the
foregoing, readers of this Quarterly Report are cautioned not to place undue
reliance on the forward-looking statements contained herein.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management has reviewed the disclosure requirements for Item 3 and, based
upon the Partnership, Funding and TCHI's current capital structure, scope of
operations and financial statement structure, management believes that such
disclosure is not warranted at this time. Since conditions may change, the
Partnership, Funding and TCHI will periodically review its compliance with this
disclosure requirement to the extent applicable.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
General. The Partnership, its partners, certain members of the former
Executive Committee of the Partnership, Funding, TCHI and certain of their
employees are involved in various legal proceedings. Such persons and entities
are vigorously defending the allegations against them and intend to contest
vigorously any future proceedings. The Partnership, Funding and TCHI have
agreed to indemnify such persons against any and all losses, claims, damages,
expenses (including reasonable costs, disbursements and counsel fees) and
liabilities (including amounts paid or incurred in satisfaction of settlements,
judgments, fines and penalties) incurred by them in said legal proceedings.
Steiner Action. On or about July 30, 1999, William K. Steiner, a
stockholder of THCR, filed a derivative action (the "Steiner Action") in the
Court of Chancery in Delaware (Civil Action No. 17336NC). The plaintiff in the
Steiner Action, through his attorneys, had entered into a stipulation dismissing
the case, without prejudice, subject to the approval of the Delaware Chancery
Court. No consideration was paid by any defendant in exchange for the
plaintiffs' agreement to dismiss the case.
Castle Acquisition. As discussed more fully in THCR's Report on Form 10-K
dated March 30, 2000, in 1996 certain shareholders filed a number of derivative
actions in Delaware and New York, purportedly on behalf of THCR, against each of
the then-members of the Board of Directors of THCR, THCR, THCR Holdings, the
Partnership, TC/GP, Inc., TCHI, Trump Casino, Inc., and Salomon Brothers, Inc.,
in connection with THCR's 1996 acquisition of the Partnership. Those cases were
eventually consolidated in the Southern District of New York.
On June 26, 1997, plaintiffs served their Third Consolidated Amended
Derivative Complaint (the "Third Amended Complaint") in the consolidated cases.
THCR and the other defendants in the action moved to dismiss the Third Amended
Complaint on August 5, 1997. By decision and order dated September 21, 2000, the
Court denied in substantial part defendants' motions to dismiss. The Court also
granted plaintiffs' application to amend the Third Amended Complaint. On October
11, 2000, Plaintiffs served their Fourth Consolidated Amended Stockholders'
Derivative Complaint. The defendants expect to file answers to the Fourth
Consolidated Amended Stockholders' Derivative Complaint later this month, and to
begin discovery. The defendants expect to defend vigorously the litigation. The
defendants cannot, however, predict the outcome of the case.
Various other legal proceedings are now pending against the Partnership.
The Partnership considers all such proceedings to be ordinary litigation
incident to the character of its business. Management believes that the
resolution of these claims will not, individually or in the aggregate, have a
material adverse effect on the financial condition or results of operations of
the Partnership.
From time to time, the Partnership may be involved in routine
administrative proceedings involving alleged violations of certain provisions of
the New Jersey Casino Control Act. However, the Partnership believes that the
final outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on the Partnership or on its ability
to otherwise retain or renew any casino or other licenses required under the
Casino Control Act for the operation of Trump Marina.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
14
<PAGE>
PART II - OTHER INFORMATION - (continued)
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
27.1 Financial Data Schedule of Trump's Castle Hotel & Casino, Inc.
27.2 Financial Data Schedule of Trump's Castle Funding, Inc.
27.3 Financial Data Schedule of Trump's Castle Associates, L.P.
b. Current Reports on Form 8-K:
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRUMP'S CASTLE HOTEL & CASINO, INC.
(Registrant)
Date: November 14, 2000
By: /s/ Francis X. McCarthy
------------------------
Francis X. McCarthy
Executive Vice President of Finance
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRUMP'S CASTLE FUNDING, INC.
(Registrant)
Date: November 14, 2000
By: /s/ Francis X. McCarthy
------------------------
Francis X. McCarthy
Executive Vice President of Finance
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRUMP'S CASTLE ASSOCIATES, L.P.
(Registrant)
By: Trump's Castle Hotel & Casino, Inc.
its general partner
Date: November 14, 2000
By: /s/ Francis X. McCarthy
------------------------
Francis X. McCarthy
Executive Vice President of Finance
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
18
